I make no bones about it… it’s been many years since I saw a market that just kept going up beyond all good reason. The technicals have been stretched for weeks; and the fundamentals, as far as actual economic and earnings growth is not there to justify it either. What is there though, and this is what has been behind it all… the incredibly easy availability of money emanating from the world’s central banks, has allowed those that are willing, to borrow that money and put it in the markets, in order to derive profit. The result, in such a circumstance, is always the inflating of a bubble. I want no part of it. I’ll wait until there’s been an extended decline that has my technicals saying that risk has been wrung out, and that the opportunity to much more safely buy-in has been signaled.
So, what are my measures of market saying at this time? They’re extended, and tell me that market risk is plenty high! I’m going to wait. Sometime, within the next several months, we’re going to get a real good opportunity to be buyers. We always do!
And, what stocks are among the very safest of dividend growers? A safe-dividend grower has to have an upwardly sloping EPS line of forward-looking estimates; that despite whatever economic issues might exist at this time, these companies are able to continue to grow their earnings. They also pay a dividend with 40%, or less, of their earnings, and have a history of raising their dividend to shareholders at a rate in the teens; resulting in rapid dividend growth. Beyond that, they are recognized by investors as very high quality companies, by sending their share prices relentlessly higher, typically causing their current dividend yield to look very low… like, between 1 and 2%. It’s the holding on to these, as they grow their dividend, that you have a 6% yield, then a 10% yield, and, in time, a yield that is well into the teens and 20’s, after the passing of more than a decade. What companies can do that?
Lately, it would look like these 19: NKE, PSA, HRL, JKHY, SBUX, TJX, HD and LOW, EFX, COST, AOS, EL, NOC, FDS, SYK, UNH, NDAQ, CVS and FL; with the obvious strength being with these five issues: HD, EFX, EL, SYK and UNH.
May you have a glorious weekend!
Harold F Crowell